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CLO
CLO
CLO - Calulo - Unaudited financial results for the six months ended 31
December 2006
Calulo
Reg No 1987/006274/06) incorporated in the Republic of South Africa
Share code: CLO & ISIN: ZAE000060711
("Calulo" or "the Company")
Unaudited financial results for the six months ended 31 December 2006
Condensed consolidated income statement
Restated
Six months six months
ended ended Year to
R`000 31.12.06 31.12.05 30.06.06
Operating lease income 35 747 27 775 63 479
Straight-line operating lease 2 049 3 229 7 198
adjustment
37 796 31 004 70 677
Direct property expenses (8 998) (6 416) (12 912)
Other operating expenses (3 625) (349) (4 094)
Sundry income - 81 152
Net fair value adjustment of (85 733) 33 810 68 412
investment properties
Straight-line operating lease (2 049) (3 229) (7 198)
adjustment
Fair value adjustment of (83 684) 37 039 75 610
investment properties
Operating (loss)/profit (60 560) 58 130 122 235
Finance income 268 116 704
Finance costs (16 172) (11 466) (30 832)
Movement in fair value of 4 200 (639) 3 208
interest rate swaps
(Loss)/profit before taxation (72 264) 46 141 95 315
and distribution
Distribution to linked (7 220) (8 788) (16 698)
unitholders
Net amortisation of debenture 87 100 220
premium
(Loss)/profit before taxation (79 397) 37 453 78 837
Taxation 29 136 (5 415) (22 650)
Net (loss)/profit for the (50 261) 32 038 56 187
period
Condensed consolidated statement of changes in equity
Share Share Accumulated
R`000 capital premium profit/(loss) Total
Balance at 1 July 3 54 152 209
2004 as previously
stated
Issue of linked 742 (29) 1 714
units restated
- Issue of linked 742 7 417 - 8 159
units as
previously stated
- Issue costs - (2 497) - (2 497)
previously
deducted
- Reallocation to - (7 433) 1 (7 432)
debenture premium
- Issue costs
reallocated to
debenture
premium - 2 484 - 2 484
Net loss for the - - (4 623) (4 623)
period restated
- Net loss for the
period as
previously
stated - - (2 224) (2 224)
- Prior year - - (2 466) (2 466)
adjustments
- Amortisation of - - 67 67
debenture premium
Balance at 1 July 745 25 (4 470) (3 700)
2005 restated
Net profit for the - - 32 038 32 038
period restated
- Net profit for
the period as
previously stated - - 31 938 31 938
- Amortisation of - - 100 100
debenture premium
Balance at 31 745 25 27 568 28 338
December 2005
Issue of linked 157 19 - 176
units
Issue costs - (3) - (3)
Net profit for the - - 24 149 24 149
period
Balance at 30 June 902 41 51 717 52 660
2006
Net loss for the - - (50 261) (50 261)
period
Balance at 31 902 41 1 456 2 399
December 2006
Condensed consolidated balance sheet
Restated
As at as at As at
R`000 31.12.06 31.12.05 30.06.06
ASSETS
Non-current assets
Direct and indirect investment 507 000 400 130 589 052
in property
Investment properties* 507 000 400 000 588 950
Equipment, furniture and - 130 102
fittings
Deferred taxation asset 9 069 - 146
Fair value of interest rate 1 986 - -
swaps
Current assets
Investment properties held for - 19 600 -
sale
Trade and other receivables 11 662 8 492 7 936
Cash and cash equivalents 7 419 613 6 996
Total assets 537 136 428 835 604 130
EQUITY AND LIABILITIES
Share capital and reserves 2 399 28 338 52 660
Debentures and debenture premium 187 348 153 006 187 435
Other interest-bearing 325 816 223 222 309 960
borrowings
Fair value of interest rate - 6 062 2 214
swaps
Deferred taxation liabilities 576 4 195 20 789
Current liabilities
Payables 12 418 5 224 16 870
Current portion of interest- 1 359 - 6 293
bearing borrowings
Unitholders for distribution 7 220 8 788 7 909
537 136 428 835 604 130
Net debt excluding debenture
debt portion:
Income earning assets (%) 62,82% 55,65% 52,51%
Net asset value per linked unit 210 244 266
(cents)
*The effect of the straight-line operating lease adjustment of R2 049 000
(June 2006: R7 198 000) is included in the value of investment properties.
The cumulative effect of the straight-line operating lease adjustment
included in investment properties is R10 866 000 (June 2006: R8 817 000).
Condensed consolidated cash flow statement
Six months Six months
ended ended Year to
R`000 31.12.06 31.12.05 30.06.06
Cash generated from 23 199 21 930 55 096
operations
Net finance costs (15 904) (11 350) (29 927)
Movements in working capital (8 138) (5 329) -
Taxation paid (40) - -
Cash flows from operating
activities
before distribution to (883) 5 251 25 169
unitholders
Distributions to linked (7 909) (3 203) (11 992)
unitholders
Cash flows from operating (8 792) 2 048 13 177
activities
Cash flows from investing (1 707) (900) (131 679)
activities
Cash flows from financing 15 821 (3 889) 117 386
activities
Net increase/(decrease) in 5 322 (2 741) (1 116)
cash and cash equivalents
Cash and cash equivalents at 738 3 354 1 854
beginning of period
Cash and cash equivalents at 6 060 613 738
end of period
Reconciliation between (loss)/earnings and headline earnings
Six months to 31.12.06
(Loss)/ Taxation (Loss)/
profit profit
before after
taxation taxation
Cents Cents Cents
R`000 per R`000 per R`000 per
unit unit unit
Net (79 397) (88,04) 29 136 32,32 (50 261) (55,72)
(loss)/profit
for the
period
Adjustments
Fair value 85 733 95,08 (24 862) (27,58) 60 871 67,50
adjustment of
investment
properties
Distribution 7 220 8,01 - - 7 220 8,01
to linked
unitholders
Headline 13 556 15,05 4 274 4,74 17 830 19,79
earnings per
linked unit
Restated Restated
six months year to
to 31.12.05 30.06.06
Cents Cents
R`000 per unit R`000 per unit
Net (loss)/profit 32 038 43,02 56 187 73,27
for the period
Adjustments
Fair value (31 624) (42,46) (48 572) (63,35)
adjustment of
investment
properties
Distribution to 8 788 11,80 16 698 21,77
linked unitholders
Headline earnings 9 202 12,36 24 313 31,69
per linked unit
Restated
Six months six months Year to
to to
R`000 31.12.06 31.12.05 30.06.06
Headline earnings 19,79 12,36 31,69
per linked unit
(cents)
(Loss)/earnings (47,73) 54,82 95,06
per linked unit
(cents)
Headline earnings 11,76 0,55 9,93
per share (cents)
(Loss)/earnings (55,72) 43,02 73,27
per share (cents)
Notes to the financial statements
1. Basis of preparation
The unaudited interim financial report has been prepared in accordance with
International Financial Reporting Standards ("IFRS"), IAS 34 - Interim
Financial Reporting, and the requirements of the South African Companies Act
1973, as amended.
The accounting policies are consistent with those applied for the year ended
30 June 2006.
2. Prior year adjustments
Amounts previously allocated to share premium amounting to R7,433 million
have been reallocated to debenture premium to more correctly reflect the
premium received on linked units issued. A portion of the costs amounting to
R2,484 million relating to the issue of linked units, previously allocated
against share premium, has been deducted from debenture premium to more
correctly reflect the net proceeds received on the issue. The debenture
premium and the debenture issue costs are amortised through profit and loss
over the life of the debentures (25 years). The interim financial statements
for the year ended 2005 have been restated to correct this classification.
3. Related-party transactions
Related-party transactions concluded during the reporting period were
concluded at arm`s length terms as would be negotiated between unrelated
willing parties.
Transactions between the Company and its subsidiaries, which are related
parties of the Company, have been eliminated on consolidation and are not
disclosed in this note.
4. Contingent liabilities
There are no material contingent liabilities to be reported.
5. Capital commitments
There are no material contracted commitments for capital expenditure.
6. Subsequent events
In management`s opinion there have been no material adjusting or non-
adjusting events that have occurred after 31 December 2006.
Issued share capital 90 173 979 (30 June 2006:
90 173 979) ordinary shares of
1 cent each
Issued debentures 90 173 979 (30 June 2006:
90 173 979) unsecured
subordinated variable rate
debentures of R1,99 each
Issued linked units 90 173 979 (30 June 2006:
90 173 979)
Weighted average linked units 90 173 979 (30 June 2006:
76 677 000)
Segmental information
Retail/
R`000 showrooms Office Industrial Other Total
Primary
segment
December
2006
Revenue
Rentals 19 776 8 884 7 087 - 35 747
Total 19 776 8 884 7 087 - 35 747
revenue
Segment
results
Operating (33 051) (17 816) (9 693) - (60 560)
loss
(33 051) (17 816) (9 693) - (60 560)
December
2005
Revenue
Rentals 14 364 7 729 5 682 - 27 775
Total 14 364 7 729 5 682 - 27 775
revenue
Segment
results
Operating 29 414 19 114 10 885 (1 283) 58 130
profit/
(loss)
29 414 19 114 10 885 (1 283) 58 130
Segment revenue and expenses
Revenue and expenses that are directly attributable to a segment are
allocated to those segments.
Expenses not directly attributable to a segment are allocated to the
corporate segment.
Additional information for investors for the period ended 31 December 2006
Compliance with IFRS and their application on the property loan stock
structure, which is unique to South Africa, has made it difficult for users
to interpret these financial statements. The information set out in the
table below has been disclosed to assist readers in determining the basis on
which the interim distribution per weighted average number of combined units
in issue was calculated.
A reconciliation has been included showing the accounting adjustments that
were not taken into account in calculating the interim distribution.
Distributable earnings
Six months Six months
ended ended Year to
R`000 31.12.06 31.12.05 30.06.06
Revenue 35 747 27 775 63 479
Direct property expenses (8 998) (6 416) (12 912)
Other operating expenses (3 625) (349) (4 094)
Sundry income - 81 152
Finance income 268 116 704
Finance costs (16 172) (11 466) (30 631)
Distributable earnings 7 220 9 741 16 698
Investors distributable
earnings per linked unit
Weighted average number of 90 174 74 485 76 677
linked units in issue
Distributable earnings per 8,01 11,80 21,80
linked unit (cents)
Opening share price 240 216 216
(cents)
Closing share price 330 235 240
(cents)
Distribution (cents) 8,00 11,80 21,90
Total return 41% 14% 21%
Reconciliation to (loss)/profit for the period
Restated
Six months six months
ended ended Year to
R`000 31.12.06 31.12.05 30.06.06
Distributable earnings 7 220 9 741 16 698
Revaluation of investment (83 684) 37 039 75 610
properties
Amortised borrowing costs - - (201)
Movements in fair value of 4 200 (639) 3 208
interest rate swaps
(Loss)/profit before (72 264) 46 141 95 315
taxation and distribution
Distribution to linked (7 220) (8 788) (16 698)
unitholders
Net amortisation of 87 100 220
debenture premium
(Loss)/profit before (79 397) 37 453 78 837
taxation
Taxation 29 136 (5 415) (22 650)
(Loss)/profit for the (50 261) 32 038 56 187
period
Distribution to linked 8,00 11,80 21,90
unitholders for the period
(cents)
Commentary
Results
Calulo has declared an interim distribution of 8,00 cents per linked unit
for the six-month period ended 31 December 2006. As advised in the trading
update published on SENS and in the press on 19 January 2007, the
distribution is less than the 11,80 cents per linked unit for the six-month
period ended 31 December 2005.
The reductions in the distributions are a result of the alignment of
Calulo`s policies to that of Pangbourne Properties Limited ("Pangbourne") in
relation to provisions, as Calulo is now a Pangbourne subsidiary.
The future strategy of Calulo is to refocus the existing portfolio to create
a specialist office fund, as part of Pangbourne`s multifund strategy. The
integration into the Pangbourne property management system and procedures
has been successfully completed. Management will concentrate on extracting
value by assessing the lease profiles, expenses, renewals and other property
fundamentals.
Prospects
On 24 May 2006, it was announced that Matemeku Property Acquisitions 104
(Pty) Limited had disposed of their 40% shareholding in Calulo to
Pangbourne. Pangbourne was required to proceed with a mandatory offer in
terms of the Securities Regulation Panel Code to Calulo unitholders to
acquire all of the Calulo linked units that it did not already own, for a
purchase consideration of 300 cents per Calulo linked unit, which resulted
in Pangbourne increasing its shareholding in the Company to 63,3%.
Following Pangbourne`s acquisition of this strategic stake, the objectives
of Calulo are to establish a high-quality office focused fund with assets in
excess of R2 billion and a market capitalisation in excess of R1 billion in
the medium term, subject to market conditions being favourable and the
requisite regulatory approvals being obtained.
The specialist office fund strategy will be positioned to take advantage of
the opportunities in the commercial property market, which has recovered
from high vacancies, oversupply and a slump in rental growth. Positive
economic growth with improved business confidence has contributed positively
to the growth in demand. A noticeable trend in the market is the take-up of
space resulting in higher rentals being achieved; this trend is expected to
continue.
During the growth of Calulo, it is envisaged that Calulo Investments
Limited, Calulo`s black empowerment partner, will maintain its 18%
shareholding.
On 19 January 2007 a joint cautionary announcement was issued with
Pangbourne advising unitholders that negotiation was proceeding to give
effect to these objectives.
Valuations
Internal property market valuations have been completed for the six-month
period ended 31 December 2006.
The valuation methodology applied for the market values is based on a
Discounted Cash Flow ("DCF") method, which takes into account market rental
assumptions on vacancies and lease renewals over a five-year period
including expenses. This methodology is in line with the Investment Property
Databank ("IPD") Standards.
The valuation for the portfolio has decreased by 15% as a result of
adjustments in the capitalisation rate, vacancies and lease reversions to
market.
The market value as at 30 June 2006 was R588 950 000, the 31 December 2006
valuation is R507 000 000.
The prospects going forward for Calulo are positive as the transferring of
Pangbourne`s portfolio of offices into Calulo will improve the overall
market value of the portfolio, as well as management`s actions in terms of
maximising the income through new lettings and lease renewals.
Timetable of events
Event Date
a. Last date to trade cum distribution Thursday, 29 March 2007
b. Linked units trade ex distribution Friday, 30 March 2007
c. Record date for unitholders
to participate in the distribution Thursday, 5 April 2007
d. Payment of distribution to
unitholders Tuesday, 10 April 2007
e. Linked unit certificate may not be Friday, 30 March 2007 to
materialised or dematerialised Thursday, 5 April 2007
For and on behalf of the board
M Faku C E Wendelken
(Chairman) (Managing Director)
19 February 2007
Registered office: Calulo Property Fund Limited, 2nd Floor, Pangbourne
House, 382 Jan Smuts Avenue, Craighall, 2196. Directors: M Faku, C E
Wendelken*, M K Diale, C M Hutchison, I P Smith, R N Wesselo Company
Secretary: J J Groenewald *Executive
Transfer secretaries: Computershare Investor Services 2004 (Proprietary)
Limited. 70 Marshall Street, Johannesburg, 2001 PO Box 61051, Marshalltown,
2107.
Date: 20/02/2007 16:17:32 Produced by the JSE SENS Department.
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